As a result of the crisis affecting Wall Street and its firms, banks have curtailed their lending to large and small business across America and even to other banks. This have caused a liquidity crisis across America which people are unable too obtain loans.
So how does this affect the job market?
There are a lot of companies that rely of loans to operate their businesses and to pay thier employees. These loans take form of traditional bank loans as well as warehouse lines of credit. Even if a company is profitable, they usually need some form of credit because their revenue typically does not match the timing of their liabilities. As a result, most companies rely on some form of commercial loans to operate their businesses.
Some banks have called their loans or have not renewed other types of loans for their clients. The companies are then unable to pay their bills and as a result, some businesses have declared bankruptcy due to the lack of available funds. If this crisis continues, many more companies will have to slow their growth, or even curtail their businesses.
To avoid this, Congress is considering the Emergency Economic Stabilization Act of 2008 which would in effect allow the US Government to buy the bad loans from these banks and thereby lend more money to businesses across the United States. If we do not take any action, many companies will not be hiring any new employees and quite a few will be laying off their own employees.
So even though, most of the American public feels that this bailout bill is helping the fat cats on Wall Street especially to the tune of $700 billion, we need it in order to help keep our economy going. As the economy rebounds, employment opportunities will pick up. As a jobseeker, that is the point that we need to keep focused on. The more jobs, the better.
